While the Indian market is appealing to national and international majors as well as to manufacturers, well-entrenched neighbourhood general and speciality stores continue to pose challenges to modern retail companies. Transition appears quite complicated in the current situation, underscoring the maxim of ‘survival of the fittest’.
Many analysts believe that Indian consumers typically display little loyalty to modern retailers. So where does that leave supermarket chain stores in the tussle to appropriate share from neighbourhood grocery retail outlets?
Last week, IndiaRetailing invited responses to this following statement: “Indian consumers can be loyal to only one retailer – the neighbourhood grocer.”
Surprisingly – though not for some industry hawks perhaps – at this point of time when the many virtues of modern retailing are talk of the town, about 62.5 per cent of the voters responded positively to the statement while 37.5 per cent voted against it.
Further, when IndiaRetailing put the question to individual retailers and discussed whether it is convenience or value propositions that drive customer loyalty, most said that more than convenience in physical terms, value-for-money propositions are what draw customers to a particular retailer.
Lalit Agrawal, CMD, V Mart, stated, “As far as consumer loyalty goes, yes, most Indians are loyal to neighbourhood retailers but only to a certain extent.” According to him, pricing plays an important role in case the customer has multiple options of organised retail outlets in a neighbourhood. “When there are huge distractions, they do have the option to switch to some other retailer, and they do so once they realise that an X retailer’s pricing is not completely honest,” he clearly stated.
According to Rajan Malhotra, president – retail strategy, Future Group, although in the current scenario, the modern neighbourhood supermarket is the only format that looks promising, it will grow alongside traditional neighbourhood grocers. “We always believe that despite the aggressive growth of modern retailing, neighbourhood retail will continue to survive,” he insisted.
The fact is that the neighbourhood grocers meet the service needs of customers rather well – most also they offer home delivery services. Larger format stores, on the other hand, rank higher in ensuring a variety of products and brands, observed Malhotra. “So while customers prefer modern supermarkets or hypermarkets for weekly and monthly shopping, they will always favour the neighbourhood grocer for daily purchases. Therefore, both segments have their own advantages,” he noted.
Echoing this, Rajiv Agarwal, MD, The Mobile Store, stated that the decision of a customer to be loyal to a retailer depends on the kind of products that the retailer is selling and the choices available to the customer. “In a country like ours where there are scores of vendors and shopkeepers available in a given location, consumers go by convenience and shop wherever they like,” he affirmed. So, when a particular retailer fails to meet customer expectations, customers simply switch to another retailer, and sometimes also back to the one in his or her neighbourhood.
Kamal Katak, director, Major Brands, however believes that the concept of neighbourhood shopping is not the only factor that attracts loyalty. “It is all about what shoppers want and what the retailers give. This is applicable for both organised retail as well as neighbourhood kirana stores,” he said.
“We have seen the success of HyperCity in Inorbit Mall, Reliance Mart in Ahmedabad, Select Citywalk in Delhi, and Ambience Mall in Gurgaon; all of these stores or centres are not exactly neighbourhood formats, but they still manage to draw a huge number of shoppers,” he noted.
Katak further stated that if a retailer gives an appropriate environment to shop and reasonable accessibility, in other words, a certain degree of retail entertainment and overall a right mix of merchandising, shoppers would be willing to drive for one hour to reach the store.
Elaborating further, Agarwal at The Mobile Store pointed out that these days there is no dearth of conscious customers who want value for money; they want the best product at a convenient price – a complete package. So, wherever they get that extra benefit – even if in a neighbourhood store – they prefer to shop there and in that case, no sense of loyalty remains as far as customer choice is concerned. “The customer is very sharp in discerning value, and is open to changing his shopping destination at any point of time,” he said.
“To sustain credibility, the retailer needs to become honest first, and then only will the customers remain loyal to him,” concluded Agrawal at V Mart.
